kpmg 2022 pre-budget survey report

KPMG 2022 pre-budget survey report

November 2021

© 2021 KPMG a partnership established under Ghanaian law and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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Foreword

The Ghanaian economy continues to respond to the impacts and shocks from COVID-19, which threatened the consistent gains made by government towards achieving its 2030 Agenda. Provisional first quarter GDP estimates released by the Ghana Statistical Service (GSS) indicate that overall growth rate of 2021 is estimated at 3.1% compared to the 2020 provisional outturn of 0.4%.

Over the past few years, KPMG conducts a pre-budget survey before the national budget is issued by government. The purpose of this is to obtain feedback from the business community on the effectiveness of government’s policies and also to solicit public expectations for the next budget cycle.

This year’s pre-budget survey report has been prepared in line with KPMG’s Global Mega Trends guiding global economies

Anthony Sarpong Senior Partner

and the trends include key factors such as “Demographics, Rise of the Individual, Enabling Technology, Economic Interconnectedness, Public Debt, Economic Power Shift, Climate Change, Resources stress and Urbanization”.

The report comes at a time when the economy is rebounding and a myriad of macroeconomic policies have been rolled out to curb the impact of the pandemic on individuals and businesses. Key among these policies is the implementation of the Ghana CARES “Obaatanpa” programme.

There is, however, growing unease about the country’s debt levels and the expectation that the public and private sectors find new and better ways of collaborating to improve revenue mobilisation, reduce dependence on debt to fund public services and catalyse job creation.

In October 2021, we surveyed 100 business leaders and obtained responses from 64 of these businesses drawn from the Ghanaian business community across 23 sectors for their perceptions of the business environment and the fiscal regimes that affect their operations.The sectors included Financial Services, Mining, Oil & Gas, Consumer Goods, Industrial & Market and other businesses including multinationals, local companies and small to medium sized enterprises. The results from the survey indicate that, some of the macroeconomic policies have been effective although a lot more of such was expected by the business community. We hope the insights from the survey will help Government in their deliberations and provide valuable contribution in the lead-up to the 2022 Budget.

Executive Summary


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Pre-budget Survey

Executive SummaryThe objective of this pre-budget survey is to solicit for views from business leaders across industries on the impact of existing policies on their businesses and to provide relevant feedback to the government through the Ministry of Finance on key insights to be considered for its subsequent budget cycles.

The report is structured into three thematic areas namely; (1) the global megatrends that are shaping governmental policies; (2) survey results & findings and key insights for consideration by government; and (3) appendices supporting the survey results.

The following is a snapshot of the key findings that we obtained from the survey:

• On Complexity of tax laws: most respondents indicated that local tax laws are complex.

• On Fiscal measures: majority of respondents indicated that fiscal measures introduced both prior to COVID-19 and after COVID-19 had minimal impacts on their businesses. Respondents also indicated that the three (3) major fiscal measures that should be prioritised by government in the 2022 budget are (1) reducing the 5% Financial Sector Recovery Levy, (2) Restoring NHIL/ GETFund input claim, and (3) Restoring the use of turnover thresholds for qualification to apply 3% VAT.

• On factors affecting business growth and profitability: Respondents also indicated that digital infrastructure and services and other factors such as cost of funding, availability of forex, infrastructure and stability of the cedi played significant roles on their business growth and profitability and as such need critical attention.

• On key stay awake issues for businesses: Respondents suggested that government should pay critical attention to the depreciation of the Cedi, high business operational costs, high borrowing costs, high rate of taxes, increased government borrowing among others.

• On the stage of business recovery: Most respondents indicated that their businesses are at the resilience stage of responding to the COVID-19 crisis. Businesses have absorbed and adapted to the changing environment. This implies that most businesses are taking stock of the crises (health and economic) and doing anything and everything possible to stay in business.

Global Mega Trends impactingeconomies


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Global megatrends impacting economiesIn assessing the impacts of government’s policies on it’s economy, KPMG has introduced the Global megatrends, which is a nine factor measure that governments need to consider in making key policies. Key insights drawn from the Global megatrends and the survey results have been highlighted in our key considerations to government.

The key factors of the nine-factor Global megatrend shaping global economies are:

Demographics; Rise of the individual; Enabling technology; Economic interconnectedness; Public debt; Economic power shift; Climate change; Resources stress; and Urbanization.


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© 2021 KPMG, a partnership established under Ghanaian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ghana.

Document Classification: KPMG Confidential

The global megatrends impacting economies (1/2)1Demographics

Higher life expectancy and falling birth rates are increasing the proportion of elderly people across the world, challenging the solvency of social welfare systems, including pensions and healthcare. Some regions are also facing the challenge of integrating large youth populations intosaturated labor markets.

Rise of the individual

Advances in global education, health and technology have helped empower individuals like never before, leading to increased demands for transparency and participation in government and public decision-making. These changes will continue, and are ushering in a new era in human history in which, by 2022, more people will be middle class than poor.

2 3Enabling technology

Information and Communications Technology (ICT) has transformed society over the last 30 years. A new wave of technological advances is now creating novel opportunities, while testing governments’ ability to harness their benefits and provide prudent oversight.

4 Economic interconnectedness

The interconnected global economy will see a continued increase in the levels of international trade and capital flows, but unless international conventions can be strengthened, progress and optimum economic benefitsmay not be realized.

Source: Future State 2030:The global megatrends shaping governments , Danish Trade Union Development Agency Ghana Labour Market Profile 2020,


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© 2021 KPMG, a partnership established under Ghanaian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ghana.


5Public debtPublic debt is expected to operate as a significantconstraint on fiscal and policy options through to 2030 and beyond. Governments’ ability to bring debt under control and find new ways of delivering public services will affect their capacity to respond to major social, economic and environmental challenges.

6Economic power shiftEmerging economies are lifting millions out of poverty while also exerting more influence in the global economy. With a rebalancing of global power, both international institutions and national governments will need a greater focus on maintaining their transparency and inclusiveness.

7Climate changeRising greenhouse gas emissions (GHGs) are causing climate change and driving a complex mix of unpredictable changes to the environment while further taxing the resilience of natural and built systems. Achieving the right combination of adaptation and mitigation policies will be difficult for most governments. 8Resources stress

The combined pressures of population growth, economic growth and climate change will place increased stress on essential natural resources (including water, food, arable land and energy). These issues will place sustainable resource management at the center of government agendas.

9UrbanizationUrbanization is creatingsignificant opportunities for social and economic development and more sustainable living, but is alsoexerting pressure on infrastructure and resources, particularly energy.

The global megatrends impacting economies (2/2)

Source: Future State 2030:The global megatrends shaping governments , 2021 Budget

Survey Results & Findings


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Demographics - OverviewSurvey Results & Findings

64

Number of Respondents

Size of Organisations Represented

6%

19%

16%59%

Micro

Small

Medium

Large

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

2

2

4

9

12

18

Accounting and Auditing

Advertisement

Advocacy

Agro Chemical Industry

Air Transportation

Circular Economy Recycling

Corporate and Commercial…

FSI- Financial Services &…

INGO

Investment and Trade

Maritime (Service)

Maritime

Print Media

Professional Services

Services (Consultancy)

Tax, Legal and Consultancy

Transport and Logistics

Education

TMT- Telecommunication,…

IGH - Infrastructure,…

CIM- Consumer Goods,…

ENR- Mining, Oil & Gas, Power,…

FSI- Financial Services Industry

Respondents by Business

***Key on Size of OrganizationLarge ( above 100 Employees) with Turnover of over US$ 3,000,000 Medium (31-100 Employees) with Turnover of US$ 1,000,001 –US$ 3,000,000Small (6-30 Employees) with Turnover of US$ 25,001 – US$ 1,000,000 Micro (1-5 Employees) with Turnover up to US$ 25,000


11

Data Collection Instrument & methodology

Mode of Survey

This is a primary research where we administered questionnaires to a number of respondents across several industries. There weretwo (2) sections to the questionnaire. The first consists of questions identifying the impact of recent fiscal measures to businesses.

The second section consists of questions regarding respondents perception of factors impacting the business and investment environment.

Sample Size

We sampled 100 business leaders from our client list with key responses received from 64 respondents across 23 business sectorsof the economy.

Data Analysis

Owing to the number of variables considered for this research model, data analysis was carried out using both the Excel and the Power BI data analytics tool.


Methodology

Q1aWhat has been the impact of tax incentives introduced prior to Covid-19 on your businesses?

Q1bWhich fiscal measures introduced in 2020 have had the most impact on your business?

Q1cWhich fiscal measures introduced in 2021 have had the most impact on your business?

Q1dWhich fiscal measures should be prioritised as part of the 2022 National Budget?

Q1eWhat are the prevalent issues of critical concern to tax payers?

In your opinion, how complex are the Ghanaian tax laws?

In conducting the survey, we administered questionnaires which asked respondents the following questions:

Q1f


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Data Collection Instrument

Q2What are three areas that your business requires support for, from the government?

Q3To what extent are the following relevant to your business’ growth and profitability?

Q4

What in your view are the relevant areas that require consideration by the government?.

Q6What are your top three ‘stay-awake’ issues”?

Cost of Funding , Stability of the Cedi ,

Cost and access to credit , Cost and access to credit , Transport infrastructure improvement, Process / Cost of clearing goods from the port & Sub-Regional Competition

Foreign exchange rate stability Cyber Security , High Speed Internet , Digital Tax Payment Systems, All Other Digital Payment Systems , National Identification System , Digital Address System & eGovernance (Government’s services portal)


Q5

To what extent are the following technological factors relevant to your business’ growth and profitability?

Q7a

How has the stimulus package from government been supportive to your business?

Q7b

From your experience, what initiatives could Government introduce to help create a sustainable business environment?

Infrastructure & Availability of Forex

Corona Virus Alleviation Programme Business Support Scheme Loan(CAPBuSS) , Waiver of Penalties & Interests , Reduction of CST tax from 7- 5% & Tax Deductibility grant to contributions and donations to Covid-19

Q9At what stage will you describe your business recovery currently?

Q8

Which of the stimulus packages have been more effective to your business?

Section 1: Fiscal Measures


14

In your opinion, how complex are the Ghanaian tax laws?

23%of the respondents stated that local Ghanaian tax laws are highly complex.

42%of the respondents stated that local Ghanaian tax laws are moderately complex.

of the respondents revealed that the Ghanaian tax laws are very complex.

6%of the respondents revealed that the Ghanaian tax laws are slightly complex.

The survey revealed that about 88% of respondents expressed sentiments that Ghana’s tax laws are relatively complex (responses range from highly complex to moderately complex); with only about6% stating that there’s no level of complexity in the local tax laws.

One of the implications of the above results, suggests that there is a high level of uncertainty in the application of tax laws by businesses.

Respondents’ view on the complexity of Ghana’s Tax laws


What Government needs to consider

Public debt has been identified as one of the key constraints on Government’s fiscal and policy options over the next decade. Government’s ability to control public debt is identified as a key determinant of capacity to deliver public services and shape the local development priorities.

Voluntary tax compliance is one of the primary drivers for boosting domestic revenue mobilisation, which allows greater fiscal space for government to respond to social, environmental and economic challenges.

As such, Government through the Ghana Revenue Authority would need to invest in tax education to enhance the ease of compliance and introduce greater certainty in the interpretation of tax regulations. This will go a long way to enhance government’s revenue mobilization drive.

of the respondents revealed that there is no level of complexity in the Ghanaian tax laws.

23%

23%

6%

42%

6%


15

Impact of fiscal measures introduced in 2020 on businesses

Impact of 2020 fiscal measures

20%of respondents were highly impacted by the Extension of the 2% Special Import Levy (SIL). The impacted respondents fall within the FSI & ENR sector

More than half of the respondents, ,were

impacted by the Extension of the 5% National Fiscal Stabilisation Levy (NFSL) . The highly impacted respondents fall within FSI sector.

55%

of the respondents were least impacted by the Waiver of penalties on outstanding debt settled by 30 June 2020. On the other hand, 23% of the respondents were highly impacted. The rest of the respondents were neutral.

55 % of respondents’ businesses were highly impacted by Waiver of penalties and interests on accumulated tax arrears up to December 2020. 52% businesses were least impacted

28%


16

What has been the impact of these tax incentives introduced prior to Covid-19 on your businesses?


55%of the respondents rated additional tax deduction for employment of fresh graduates as least significant. Most of these respondents were in the CIM and ENR sector.17% rated it as slightly significant.

50%of the respondents rated Increase in thin-cap rule from 2:1 to 3:1 as least significant. Most of these respondents were in ENR and FSI sector. The second highest category, with 19% rated it as slightly significant

69%of the respondents rated location incentives for manufacturing business outside of Accra or Tema as least significant and most of these respondents were in the ENR and CIM sector. With 19%, moderately significant was rated second by respondents.

44%of the respondents rated the 3 years and 5 years carry forward of tax losses for businesses as least significant and most of these respondents were in the FSI sector. Moderately significant was 23%, placing second


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Of businesses were least impacted by the 30% rebate on the income tax due for companies in hotels and restaurants, education, arts and entertainment, and travel and tours for the second, third and fourth quarters of 2021.

75%

of the businesses were least impacted by the Deduction of contributions and donations towards COVID-19 as allowable expenses for income tax purposes with 36% being highly impacted

50%

of businesses have been significantly affected by the 1% COVID-19 Health Recovery Levy on both Standard and Flat Rate Value Added Tax Suppliers. Majority of business fall within FSI,CIM,ENR and TMT

61%

of business were least affected by the 5% Financial Sector Clean-up Levy on profit before tax of banks. On the other hand, 28% of businesses were highly impacted. The 28% fall under FSI

of respondent businesses were least impacted by the Decrease in Communication Service Tax (CST) from 9% to 5%. 30% of businesses were highly impacted with majority of the business falling within FSI, TMT and ENR

52%50%


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Impact of fiscal measures introduced in 2020 on Consumer and Industrial Markets (CIM) – (1/2)


***1 is least impact and 5 is highest impact

33%

11%

33%

11% 11%

1 2 3 4 5

Extension of the 2% Special Import Levy (SIL)

33%

11%

22% 22%

11%

Waiver of penalties on outstanding debt settled by 30 June 2020

Deduction of contributions and donations towards COVID-19 as allowable expenses for income tax purposes

44%

11% 11% 11%

22%

22%

33%

22% 22%33%

11% 11%

33%

11%

33% 33%

11%

22%

Decrease in Communication Service Tax (CST) from 9% to 5%

Waiver of penalties and interests onaccumulated tax arrears up to December2020

% Financial Sector Clean-up Levy on profit before tax of banks


19

Impact of fiscal measures introduced in 2020 on Consumer and Industrial Markets (CIM) – (2/2)


***1 is least impact and 5 is highest impact1 2 3 4 5

1% COVID-19 Health Recovery Levy on both Standard and Flat Rate Value Added Tax Suppliers

30% rebate on the income tax due for companies in hotels and restaurants, education, arts and entertainment, and travel and tours for the second, third and fourth quarters of 2021

Extension of the 5% National Fiscal Stabilisation Levy (NFSL)

11%

56%

33%

89%

11%

44%

11% 11% 11%

22%


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Impact of fiscal measures introduced in 2020 on Energy and Natural Resource Industry (ENR) – (1/2)









25% 25%

8%

17%

25%

33%

8%

25%

8%

25%25%

17%

8%

17%

33%

33%

17% 17%

8%

25%

33%

8%

25%

8%

25%

58%

8%17% 17%

1 2 3 4


21

Impact of fiscal measures introduced in 2020 on Energy and Natural Resource Industry (ENR) – (2/2)






8% 8%

50%

33%

67%

8%17%

8%

1 2 3 4

42%

17% 17% 17%8%


22

Impact of fiscal measures introduced in 2020 on Infrastructure, Government and Health Care Industry












25%

75%

25%

50%

25%

50%50%

25%

25%

50%

25%

50%

25%

50%

25%

25%

25%

25%

50%

75%

25% 25%

25%

50%


23

Impact of fiscal measures introduced in 2020 on Financial Services Industry (FSI)



33%

11%

33%

17%

6%

Extension of the 2% Special Import Levy (SIL) Waiver of penalties on outstanding debt settled by 30 June 2020


50%

11%

22%

11%6%

17%

28%

17%22%

17%




17%

28%

11%

33%

11%

22%

33%

22% 22%17%

11%6%

22%

44%


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Impact of fiscal measures introduced in 2020 on Financial Services Industry (FSI)



6%

22%17%

39%

17%




61%

11% 11%17%22%

6%

17%11%

44%


25

Impact of fiscal measures introduced in 2020 on Telecommunication, Media and Technology Industry


50%50%


50%50%

Waiver of penalties on outstanding debt settled by 30

June 2020

1 2 3 4 5

50%50%

Deduction of contributions and donations towards COVID-19 as allowable expenses for income

tax purposes

50%50%

Decrease in Communication Service Tax

(CST) from 9% to 5%

50%50%

Waiver of penalties and interests on accumulated tax arrears up to

December 2020

100%

5% Financial Sector Clean-up Levy on profit before tax of

banks

100%

1% COVID-19 Health Recovery Levy on both Standard and Flat Rate Value Added Tax

Suppliers

100%

30% rebate on the income tax due for companies in hotels and restaurants,

education, arts and entertainment, and travel and tours for the second, third

and fourth quarters of 2021

50%50%



2626


In your opinion, which of the following fiscal measures should be prioritised as part of the 2022 National Budget?

respondents would like government to proritise Restoring NHIL/ GETFund input claim

want government to Restore the use of turnover thresholds for qualification to apply three percent VAT users

53%

50%

39%

123

businesses indicated that Reducing the 5% Financial Sector Recovery Levy should be a top priority in the 2022 budget.


27

How prevalent are these issues of critical concern to tax payers?

73%businesses indicated that Fairness in tax disputes is highly prevalent verse 16% of respondents indicating it’s least prevalent.

58%businesses indicated that Frequency of tax audits is highly prevalent while 25% of respondents indicated it’s least prevalent.

59%businesses indicated that Duplication of tax audits is highly prevalent. 26% of respondents indicating it’s least prevalent.

73%businesses indicated that Ease in resolving tax disputes is highly prevalent verse 17% of respondents indicating it’s least prevalent.


28

Impact of fiscal measures and key considerations for governmentBased on responses received on fiscal measures, it appears that most businesses were least impacted by new tax incentives introduced (both prior to COVID-19 and in the wake of the pandemic).

Stakeholder ConsultationIncentive Impact assessment

To enable government achieve it’s economic growth drive through fiscal incentives employed, while also contributing to reduction in public debt, it will be prudent for the government to consider the below:

Conduct incentive impact assessment to ascertain the potential benefits and effects of incentives on respective industries before the incentives are rolled out.

Undertake consistent industry stakeholder consultations to ascertain the needs of respective industries before rolling out incentives to enhance their values.


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Feedback on impact of fiscal measuresThe new incentives were heavy on financial services and trading sectors. No direct implications for professional services firm

“NHIL , GETFL and now Covid 19 Health Recovery Levy on imported services is negatively impacting telecommunication business. About 70% of our major business lines (ie Bandwidth, Value Added Services, Internet, IP Address services, and the like are foreign services which are not available locally)

Yes government is trying its’ best in terms of policy to help curb the effect of Covid- 19 on the economy. The real challenge is it does not really get to the intended industry.

These measures did not have any impact on our business as it was not sector specific

Most of these reliefs did not affect our organisation directly

The extension of the 5% National fiscal Stabilization levy should be stopped.

‘‘

For banks, the reduction in the Primary Reserve Requirement from 10% to 8% and cut in MPR from 16% to 14.5% has had a moderate to high impact on our business

Most of these measures affected most businesses because businesses were not making much profit yet they had to pay these levies to the Government

‘‘

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‘‘‘‘‘‘

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Section 2: Business and Investment Climate


31

What are the three areas that your business requires support for, from the Government?

1

2

3

10%

67%

23%

1

2

3

30%

40%

1

2

3

11%

58%

1

2

3

30%

52%

30%

31% 18%

Greater certainty in the application of existing tax regulations and laws

Reduction of significant changes of tax laws in midyear budget reviews

Regional expansion (Taking advantage of regional trade agreements)

Research & Development and Innovation

1 = least important and 3 = most important



32

What are the three areas that your business requires support for, from the Government?

1 = least important and 3 = most important)

1

2

3

22%

50%

28%

1

2

3

8%

70%

1

2

3

28%

56%

22%

16%

Incentives for retraining and upskilling talent

Cost of energy and power

Cost of clearing goods from the port



33

What in your view are the relevant areas that require consideration by the Government?

Foreign exchange rate stability

Cost and access to credit

Cost and quality of utility services

Transport infrastructure improvement

Process / Cost of clearing goods from the port

Sub-Regional Competition

1

2

3

1

2

3

1

2

3

1

2

3

1

2

3

1

2

3

13%

14%

73%

14%

23%

63%

14%

28%

58%

21%

31%

48%

13%

31%

56%

33%

42%

25%1 = least important and 3 = most important)



34

To what extent is your business’s growth and profitability affected by these relevant factors? (1/4)


66%

10%

8% 8% 8%

Agreed to a large extent that cost of funding affected their business growth and profitability

Did not agree that cost of funding affected their business growth and profitability.

Agreed to some extent

Agreed to a little extent

Agreed to a moderate extent

Cost of funding

In line with KPMG’s Global Mega Trend 6

“Economic Power Shift”, Government can

consider enhancing the global competitiveness

of its interest rates so as to lift millions out of

poverty while also exerting more influence in

the global economy.

Consideration for government


35

To what extent is your business’s growth and profitability affected by relevant factors? (2/4)


61%

14%

9% 5%

Agreed to a large extent that the availability of forex affected their overall growth and profitability




Were not affected at all by the availability of Forex

Availability of Forex

11%


Based on the survey responses, availability of forex is a key factor

that affects business’s growth and profitability. As such, we propose

that government aligns with KPMG’s Global Mega Trend 4 –

“Economic interconnectedness”, by instituting mechanisms to

increase the levels of international trade and capital flows.

Government can update its’ structures such that they are consistent

with internationally professional regulatory regimes and develop

increased skills for aligning national policy based on international

agreements.


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Consideration for Government

Based on the survey responses, most

respondents indicated that the availability of good

infrastructure has significant impact on their

business growth and overall profitability with only

2% of respondents stating that good state of

infrastructure has no impact on their business

growth and profitability.

We therefore propose that government should

continue to make investments aligning with

KPMG’s Global Mega Trend “9” – Urbanization,

which is geared towards creating significant

opportunities for social and economic

development and more sustainability. With

ongoing initiatives supporting infrastructure,

government can do this by building up robust city

management skills in areas of economics,

planning, infrastructure and transportation, etc.

52%

3%

13%

30%

2%

Infrastructure

Were not affected by the availability of infrastructure

Agreed to a large extent that the state of Infrastructure affected their business growth and profitability





37



Stability of the cedi

2%

86%


Agreed to a large extent that Stability of the cedi affected their business growth and profitability

6%

Agreed to a little extent6%


Consideration for Government

Based on the survey responses, stability of the cedi, is

a significant factor affecting business’s growth and

profitability. As such, we propose that government

should align with KPMG’s Global Mega Trend 4 –

“Economic interconnectedness”, by instituting

mechanisms to stabilise the cedi, through the

minimisation of imports, and enhancing the

industrialization drive in the country. Government should

continue to position the country to benefit from intra-

Africa trade and broaden participation in international

trade agreements, including bilateral and multilateral

trade agreements towards enhancing its’ export drive.


38

To what extent are technological factors relevant to your business? (1/4)

Cyber Security

6%

75%

15%

Indicated cyber security is relevant to a large

extent for their business

Indicated relevance to some extent

Of respondents indicated it was

relevant to a moderate extent

2%Indicated cyber

security was relevant to a little

extent

High Speed Internet

87%

8%

Indicated high speed internet is relevant to a large extent for their business’s

growth and profitability




of respondents indicated cyber security were not relevant at all to their growth and profitability2% 2%

of respondents indicated higher speed internet were not relevant at all to their growth and profitability

3%



39


Digital Tax Payment Systems

6%

64%

26%

Indicated payment systems are relevant to a large extent in

their business

Indicated relevant to some extent



All Other Digital Payment Systems

8%

67%

20%

Indicated the national ID system

is relevant to a large extent for their

business




3%Indicated relevance

to a little extent

2%of respondents indicated Other Digital Payment Systems were not relevant at all to their growth and profitability

2%Indicated

relevance to a little extent

2%of respondents indicated that Digital Payment Systems was not relevant at all to their growth and profitability



40


14%

49%

23%

Indicated the National Identification System is

relevant to a large extent for their

business


relevant to a moderate extent Indicated

relevance to some extent

9%Indicated

relevance to a little extent

8%

55%

30%

Indicated eGovernance is

relevant to a large extent for their

business


relevant to a moderate extent Indicated relevance

to some extent


to a little extent

5%

National Identification System eGovernance (Government Services Portal)

2%of respondents indicated National Identification System were not relevant at all to their growth and profitability

of respondents indicated e-Governance was not relevant at all to their growth and profitability



41


11%

54%

23%

Indicated the digital address system is relevant to a large

extent for their business





to a little extent

3%

Digital Address System

of respondents indicated Digital Address System was not relevant at all to their growth and profitability



42

Impact of technology measures and key considerations for Government Based on responses received, it is evident that technology is key to most businesses. Government is on the right track with it’s digitization drive.


The survey responses suggests that businesses recognise the importance

of enabling technology as a source of competitive advantage.

In line with KPMG’s global mega trend “3” – Enabling Technology,

government should consider investing more in information technology and

digitalisation to harness their strategic and operational benefits. The

investment in technology and digitalisation should be supported with a

coordinated skill development and enhancement program, especially for the

youth to create inclusive and sustainable economic outcomes.

What are your top three ‘stay-awake’ issues”?


44

Common “stay awake” issues across respondents

Depreciation of the CediAcross all survey respondents, the sustained depreciation of the cedi remained a strong area of concern. Survey respondents made repeated mention that the fall in the value of the cedi raised input costs and reduced margins.

Increased Government BorrowingSurvey respondents generally felt government consistently borrowed for consumption related expenditure other than for infrastructure and development projects.

High Rate of TaxesRespondents generally felt their company incomes were being burdened unnecessarily with the financial services currently having an effective tax rate of 35%.

High borrowing costsRising interest rates were frequently touted as a stay awake issue from business respondents. Respondents reiterated that the increase in borrowing costs reduced overall availability of capital to fuel further growth.

High Operational CostsSurvey respondents highlighted that a combination of inflationary pressures, rising fuel prices and utilities are significant detractors to overall growth and profitability.



45

Feedback on top three “stay awake” issues? (1/2)“Forex, crude oil prices and frequent audits”

• Stability of local currency (GHS) Government bureaucracy

• Corruption• Cyber Security

• Quality infrastructures • Level of security in the economy • Thriving Economy

• Corruption within Gov't Agencies

• Instability of the Economy• Unfair bidding processes

• Impact of COVID-19 on the asset quality of businesses• Corporate governance in terms of strengthening and improving

capacity of board members to be effective. • Cost of Health care

• Taxes• Commitment to fight corruption• Value for money in all Govt.

Contracts• Level of unemployment

“Cost of Port Operations and Rising cost of Fuel.”• Cost of funding • High cost of utilities • Poor infrastructure• Internet access

• Tax rates• Interest Rates• Business registration and

licensing processes

• Impacts of COVID-19• Power Crisis, • Tax net.

“Integrity within the tax environment, especially from GRA workers”.

• Ambiguity in tax laws• Strengthening government

institutions• Availability of COVID-19

vaccines



46

Feedback on top three “stay awake” issues? (2/2)“Government borrowings spent on consumption and limited job creation efforts”

• Cyber security, • Tax burdens on banks• Constant electricity supply

“Extreme Cost of doing business in Ghana, Example Utility, Harbour Taxes, Logistics etc.”

“Enhance tax administration and improve the judicial system.”

• Invest in cyber security• Improve import tax regime• Realign duty draw-back

regime and benchmark values.

“Not promoting made in GH products”

“Enhance Tax liability certainty, increased tax base and enforcement of penalty provisions.”

• Exchange rate stability • Low bank Credit Rates• Rational Pricing of Utilities

• Health insurance coverage • Certainty in tax laws• Tax transparency and dispute

resolution• Digitalization and technology in public

sector.

• Youth Unemployment• Corruption• Constant Depreciation of the

Cedi• Cost of living and inflation

• Mining is low hanging fruit for Government in terms of frequency, multiplicity, duplicity of tax audits which is often undertaken by officials without a deep understanding of the industry and thus raise issues which would not otherwise be issues.

• Application of Development/Investment Agreements entered into by Government, especially the stability clauses is a key catalyst to growth of the economy.

• Impact of Bank of Ghana digital currency (ecedi) on banking sector. Effective stakeholder engagement and communication is critical to avert adverse impacts

• Enhance the overall security in the economy• Review digital tax payment systems• Improve Industrialization efforts


What initiatives could Government introduce to help create a sustainable business environment


48

Initiatives Government could introduce to help create a sustainable business environment (1/2)

““Create more avenues for entrepreneurs to get access to funds”.

• Stabilize the GHC and inflation• Stabilize the prices of petroleum products• Focus on enhancing budget controls• Minimize tax reviews• Introduce more COVID-19 recovery programs

to enhance business competitiveness.

• Enhance public sector process digitalisation to reduce the operational costs to businesses.

“Introduce an implementation and monitoring process to ensure that local content requirements are adhered to”

“Adhere to fiscal stabilization policies to enhance economy competitiveness”

“Widening the tax bracket and net.”

• Enhance effective stakeholder engagements and implementing eCedi.

• Employ a more holistic strategy to minimize the cash-in-transit robberies on financial institutions.

• Minimize government tax expenditures and grant reliefs on a case-by-case basis other than the general approach.

• Intensify collaboration with private business leaders to create a sustainable business environment.



49

Initiatives Government could introduce to help create a sustainable business environment (1/2)

• Facilitate trade between other ECOWAS countries• Implement a strategy to tax citizens• Minimize cost of funding and credits

• Improve infrastructure network• Enhance tax transparency, innovation and

accountability• Minimize corporate tax rates and create more

incentives for companies to employ fresh graduates

• Our educational system should be re-looked at to make it relevant to the economy.

‘’Enforce existing environmental laws and regulations. Stop encroachment in duly registered land and properties. Regulate better the Chieftaincy interference in running business when they see it to be profitable’’

• Improve opportunities for capacity building for SMEs.

• Scrapping of the 5% Financial Sector Recovery Levy.

• Introduce a national business plan to guide government developmental agenda.

• Introduce infrastructure bonds and windfall taxes to enhance government funds build up.“Revamp GRA to improve operations and

mobilisation capabilities”


At what stage will you describe your business recovery currently?


51

Pandemic

• Viral outbreak has becomea healthcare crisis that isoverwhelming hospitals and response capacity.

• A lack of ability to address and treat the outbreak is leading to radical lockdown measures.

• Infections continue to rise but lockdown measures areproving effective at slowing the rate.

• Healthcare capacity is catching up / getting ahead of the spread,enabling some lockdown measures to be loosened.

• The virus spread decreases,healthcare capacity stabilizes and treatment / vaccine researchlooks promising.

• Loosened lockdown measuresare not resulting in further outbreaks, allowing domestic reopening to commence.

• The virus is broadly contained and healthcare is in a state ofpreparedness

• Lockdown has been fully liftedand borders are reopening asa result of effective treatmentand/or a vaccine and/or herdimmunity.

Economic

• Lockdown measures areeffectively halting the economyand creating simultaneoussupply and demand shocks thatlagging indicators are not yetregistering.

• Economic impact is now evidentin lagging indicators and thedecline is continuing despiteinterventions.

• Unemployment rates are rising dramatically and consumer confidence is bottoming out.

• The economy has stoppeddeclining and is beginning tostabilize, slow (re)growth in some sectors is starting toshow.

• Unemployment rates have stopped increasing and are beginning to stabilize.

• Production / manufacturingstabilizes as lockdown measures are lifted.

• Consumer confidence remainslow.

• Stabilization of the economy isconfirmed, and slow-but-steady(re)growth is starting to show more widely.

• Production / manufacturing is starting to increase as demand returns.

• Consumer confidence isslowly beginning toincrease.

Business

• The primary focus for companies is on crisis management and business continuity.

• All decisions being made are framed in the ‘here andnow’.

• Companies are taking stock ofthe crises (health and economic) and doing anything and everything possible to stay in business.

• Businesses are starting to seethe ‘light at the end of the tunnel’and/or getting acclimated to thedark (i.e. finding ways to operateunder lockdown restrictions).

• Reopening in both social and economic terms is allowing businesses to fully re-emerge.

• Companies are leveraging efforts from / identified in earlier phases to transform and be successful in the newreality.

ReactionRespond to crisis

ResilienceManage through uncertainty

RecoveryIdentify opportunities

New RealityAdapt to a new world

Business recovery (1/2)


52

Business recovery (2/2)

8% - Reaction

47% - Resilience

19% - Recovery

of respondents indicated that their businesses are currently at the resilience stage of responding to crisis

of respondents indicated that their businesses are currently at the recovery stage of responding to crisis

of respondents indicated that their businesses are currently at the reaction stage of responding to crisis

26% - New Realityof respondents indicated that their businesses are currently adapting to a new world of managing crisis


Other General Comments on Already Implemented Initiatives


54

Other General Comments…

• Introduction of utility subsidy during the COVID-19 period assisted businesses to recover their operational costs.

• Introduction of Online Tax Filing and Payment has minimized businesses’ tax administration costs. Government should coordinate efforts to maintain this initiative.

• The e-Governance (Government’s services portal) is very helpful and must be secured to ensure continuity.

Appendix


56

Macro Economic Performance

2021 End June Outturn

2020 Prov. Outturn2019 OutturnMacroeconomic Performance

Non Oil GDP Growth Rate

Overall GDP Growth Rate

End Period Inflation Rate

Fiscal Deficit (% of GDP)

Primary Balance (% of GDP)

Import Cover(Number of months cover)

6.5% 0.4%

5.8% 0.9%

7.2% 10.4%

11.7%

0.8% (5.3)%

4 4.1

3.1% **

4.6%**

7.8%

5.1%

(1.7)%

5Sources: 2021 Mid Year Budget Statement & 2021 Budget Review **As at end of March 2021

4.8%

Economic Snapshot


57

Key Government initiatives from the 2021 budget statement

Economic Snapshot

Financial Services

• Additional Investment in the Venture Capital Trust Fund

• Easing access of Micro, Small, and Medium Enterprises (MSME’s) to Insurance

• Introduction of Security Lending and Borrowing by Ghana Fixed Income Market (GFIM)

• Ghana Stock Exchange’s partnership with SIGA and other private sector associations

• Introduction of Mobile Applications for Security Trading

• National Development Bank

Energy and Natural Resources Health

• Setting up of four (4) more drone centres

• Health Sector Regulation Program

• Boosting the Pharmaceutical Industry

• Health Sector Management & Admin Programme

• Agenda 111

• Power Sector Development and Management Programme

• Energy Efficiency and Demand-Side Management

• Renewable and Alternative Energy Development Programme

• Petroleum Sector Development and Management Programme

• Mineral Resources Development and Management Programme

Trade & Industry

Agriculture

• Enhancement of Mechanised Farming for Agriculture and Agri-Business Sector

• Development and roll-out of structures for the Tree Crops Development Authority

• Expansion of the Aquaculture for Foods and Jobs (AFJ) Programme

• Boosting Agriculture and Agri-business Sector

• Developing the Housing Sector

• Enhancing Investment Promotion and Management

• Setting Up an Automotive Manufacturing Support Centre

Transportation

• Implementation of Lease-to-own Financing Arrangement

• Development of Capacity for Railway Maintenance

• Expansion and Improvement of Road Infrastructure

• Pursuit of Aviation Driven Development Agenda (ADDA)

Source: 2021 Year Budget Review


58

Performance Outlook

Economic Snapshot

Source: Bank of Ghana and Ministry of FinanceNotes: y-o-y – year on year, eop – end of period, ave – average*Mid Year Data** 2021 projected

The COVID–19 pandemic necessitated a revision of key macro economic targets for 2020 by government. The pandemic also caused a decline in Ghana’s economic growth. This notwithstanding, the economy is now beginning to see a recovery a year on .

Macro economic forecast

2018 2019 2020 2021 2022 2023 2024 2025 2026Nominal GDP, USDbn 65.3 67.2 72.3 74.7* 87.8 97.6 108.5 121.2 136Real GDP growth, % y-o-y 6.2 6.5 0.9 3.1* 5.0 5.1 4.9 6.0 6.0GDP per capita, USD 2,194 2,210 2,328 2,522** 2,743 2,988 3,256 3,567 3,927Population, mn 29.6 30.3 31.1 30.8 32.0 32.7 33.3 34.0 34.6Consumer price inflation, % y-o-y, av. 9.8 7.2 10.4 7.8* 7.0 7.0 7.0 7.5 8.0

Central bank policy rate, % eop 17.0 16.00 14.50 13.50* 12.00 12.00 12.00 12.00 12.00Exchange rate GHS/USD, av. 4.82 5.53 5.76 5.9 4.44 4.53 4.62 4.71 4.81Exchange rate GHS/EUR, av. 5.51 6.21 7.06 6.8 4.44 4.53 4.62 4.71 4.81Budget balance, USDbn 5.91 5.95 -4.8 -5.1 -5.1 -5.0 -4.8 -4.4Budget balance, % of GDP -3.78 -4.69 -11.7 -3.8* -5.7 -5.2 -4.6 -3.9 -3.2

Current account balance, % of GDP -3.1 -2.8 -3.2 -3.0** -2.8 -2.7 -2.6 -2.5 -2.4

Foreign reserves ex gold, USDbn 11.6 15.6 15.6 15.7** 17.5 19.6 22.0 24.6 27.6

Import cover, months 3.6 4.0 4.1 5 * 4.8 4.8 4.9 4.9 4.9


59



1 2 3 4 5 1 is least and 5 is highest impact



27 8 9 7 13

Waiver of penalties and interests on accumulated tax arrears up to December 2020


22 11 13 9 9

27 8 14 6 9

26 9 16 8 5


60



1 2 3 4 5



9 9 7 22 17


48 4 6 5 1

5% Financial Sector Clean-up Levy on profit before tax of banks

32 8 6 7 11


15 18 12 10 9

1 is least and 5 is highest

20 12 9 11 12


61

Participant’s view on relevance of some economic activities

Survey Results & Findings - CIM


62


Survey Results & Findings - ENR


63


Survey Results & Findings - IGH


64


Survey Results & Findings - FSI


65


Survey Results & Findings -TMT


66

Participant’s view on the benefits of some tax incentives



67




68




69




70




71

Participant’s view on the significance of tax incentives



72




73




74




75




76

Participant’s rating on tax and levy policies



77




78




79




80




81


Participant’s rating on other tax and levies perspectives


82




83




84




85



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